This type of mortgage is used when your home is being built. It is usually a two-step borrowing process. For the first step, borrowers pay a high interest rate during the construction. In the first step the borrower draws money out to pay the builder, and the mortgage payment is only the interest on the amounts drawn out. After the home is built and certified as able to be occupied, the borrower goes through a second closing when the mortgage loan converts to a conventional fixed rate mortgage.